The international rating agency demoted the International Industrial Bank’s long-term and short-term contractor credit ratings from ВВ-/В to В-/С. At the same time, both ratings were placed on the CreditWatch list with Negative rating outlook.

‘This demotion has to do with the bank’s very vulnerable liquidity status, the company’s increased risk of debt refinancing, and our concerns over the bank’s ability to save enough money to pay off its large-scale loans whose repayment dates are approaching. One such loan is a ?200m Eurobond one that is to be redeemed on July 6, 2010,’ says Standard & Poor's credit analyst Mikhail Nikitin.

According to the agency’s estimates, the International Industrial Bank’s liquid assets (money plus a short-term inter-bank net position) amounted to only about 4% of its total assets on June 1, 2010.

Standard & Poor's also reports that, unlike many other Russian banks, the International Industrial Bank keeps relying heavily on the unsecured loans provided by the Central Bank.

‘The bank’s ratings could go further down if the liquidity situation does not improve, for example, in terms of paying off the debts with looming repayment dates,’ Nikitin noted.